Assignment – accrued and future rights

Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd and OUTOTEC (USA) INC [2020] EWHC 2537 (TCC) concerned a power plant. The main contract was an amended IChemE Red Book 5th edition, 2013 and the subcontract an amended IChemE Yellow Book 4th edition, 2013. The main contract was terminated by the Employer (EWHL) and the subcontract was assigned to EWHL. All well and good, until EWHL commenced proceedings against the contractor (MW) for damages estimated to be in the sum of £133m for the costs of rectifying defects, delay damages and additional costs. MW disputed the claim and pursued a counterclaim against EWHL. MW sought to claim against the subcontractor (O) in respect of sums claimed by EWHL.

The Court had to decide preliminary issues as to the effect of the assignment from O to EWHL and whether MW could pursue its claims against O as direct claims under the sub-contract or under the Civil Liability (Contribution) Act 1978 (CLA).

No More Reverses on VAT Reverse Charge

Despite being delayed on two occasions, HMRC’s Domestic Reverse Charge for Building and Construction Services (VAT Reverse Charge) starts in the Spring of 2021.

This means that the construction sector has another change to grapple with, against the already uniquely challenging Covid-19 backdrop.

The VAT Reverse Charge is to help combat organised crime groups operating within the construction industry. We all know what these criminals do - charge VAT and never account to HMRC for it. However, moving the obligation to pay VAT to HMRC up the supply chain impacts on the cashflow of contractors and subcontractors.

Who is affected by these changes, and when?

Contractors and subcontractors who are registered for the purposes of the Construction Industry Scheme (CIS) and receive building and construction services from others will be required to pay those others net of VAT and account for the VAT to HMRC.

New protection for office-based staff:

Like every other profession, construction is calibrating to the new normal. For the latest on new normal in the office, please have a look at:
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/offices-and-contact-centres

The construction team will continue to work from home, with admin functions performed by a support team based in the office. We worked at home a lot before the pandemic, so it is pretty much business as usual.

Continued support for construction clients

We continue to support our construction clients, assessing risk on existing and prospective projects in the light of the pandemic.

Health risk is, of course, a top concern and we are pleased to see at https://www.gov.uk/government/news/further-expansion-of-access-to-coronavirus-testing-helps-protect-the-most-vulnerable that: “construction workers to emergency plumbers, research scientists to those in manufacturing - can now be tested”.  “All they need to do is go on the internet and apply for a test.”

Covid-19 Updated SOP

It has been a busy short week, with a focus on Covid-19, of course. Since our news post last week an updated SOP has been issued which may be accessed at:
https://www.constructionleadershipcouncil.co.uk/news/site-operating-procedures-version-3-published/

April 8 - Construction Unit Update: Coronavirus

We continue to adapt as we help our clients work out whether to keep sites open during the lockdown and how to operate contract provisions rarely looked at before this pandemic was declared. It is looking likely that the lockdown will be extended and in England at least it is business if possible on construction sites. Scotland and Wales may plough their own furrow.
The latest guidance (7 April) for keeping workers safe is at:

A message from the Construction Unit, to our clients past, present and future

Like you all, we are working under very different conditions. Sean and Jan are used to working from home so the transition to home working has been straightforward. The only change is that callers may hear a dog barking in the background; we are working on some training on that issue! Our first concern is for people’s physical and mental well-being, but we know some employers, contractors and sub-contractors are worried about paying and getting paid on time.

We are happy to discuss options with you from the legal to the practical. There is no charge for an initial phone discussion, and we are open to no win no fee arrangements on suitable cases. Our debt recovery department works on a percentage of fee recovered; that might be of interest to some.

BREXIT: 11pm on 31 January 2020- some thoughts

Here in the construction unit, we have been pondering how to mark Brexit day. As lawyers, we are encouraged to consider mediation as a way of resolving disputes cheaply (relatively) and quickly. We know though that despite the court liking for mediation, there are some disputes that are simply not suitable for mediation. Brexit differences seem to fall into that category; discussion of Brexit rarely results in a change of position or a meeting of minds, rather a retreat to the trenches.

A New Case on Novation

This is the last Construction Unit news before the Christmas break and we wish you all an enjoyable break, whether or not it is a time of celebration for you.

The legal principle of unjust enrichment relied on by the Claimants in the December 2019 case of Munkenbeck [2019] EWHC 3225 in the Technology and Construction Court is rather esoteric, but this case will be of interest to consultants and contractors with novated appointments and building contracts.

Unjust enrichment involves the unjustly enriched paying the enricher the value of the benefit received. It can be claimed without a contract.
The case is lengthy, so in a nutshell:

Head of Construction attends the Adjudication Society Annual Conference

Our Head of Construction, Jan Grimshaw, attended the Adjudication Society Annual Conference on 7 November for an update on all matters adjudication, particularly the interplay between enforcement of adjudication decisions and the tactical use of CPR Part 8.

The next day Jan attended the Chancery Lane Project, a climate change conference for lawyers, spending the day discussing and working up ideas for "greening" contracts and workplaces.

Thanks to the Chancery Lane Project for organising this stimulating event. The Chancery Lane Project is inviting lawyers to host their own collaborative environment problem solving event. If you would be interested in attending or co-hosting an event in the Bristol area, please get in touch on jan.grimshaw@daviesandpartners.com.

Future Homes Standards- consultation closing 10 January 2020

Of interest to all involved in constructing houses, the Ministry of Housing, Communities and Local Government consultation ‘The Future Homes Standards’ is the first of two consultations on new standards for housing and is focused on changes to the Building Regulations, Part L (conservation of fuel and power) and Part F (ventilation) for new dwellings.